Software stocks experienced a significant rally in May 2026, with the iShares Expanded Tech-Software ETF climbing 8% this week and closing the month up 21%, marking its best monthly performance since October 2001 [1]. This surge was fueled by strong earnings from Snowflake and Okta, which demonstrated that some companies are adapting to artificial intelligence disruption more effectively than anticipated by Wall Street [1].
Snowflake was a standout performer, recording its best day ever on Thursday and gaining nearly 50% in the four trading days following the holiday on Monday [1]. The company announced a $6 billion cloud and chip deal with Amazon and raised its guidance, attributing the positive outlook to increased customer adoption of AI tools [1]. CEO Sridhar Ramaswamy noted, "We're also seeing customers deploy and scale workloads at a faster pace" [1]. Argus Research analysts described Snowflake as a "picks and shovels" play on generative AI, raising their price target to $300 from $250. Snowflake's stock closed Friday at $255.55, up 17% for the year [1].
Okta also posted impressive gains, jumping a record 30% on Friday after reporting better-than-expected results [1]. The company highlighted that the shift to agentic AI is prompting businesses to invest in identity security tools and bolster defenses against bot attacks [1]. CEO Todd McKinnon stated, "AI products are going to take longer, but every organization is going to build and deploy agents. It's fundamental infrastructure that's going to be required over the next few years" [1].
Other notable software stocks included Atlassian, which climbed 26% for the week, and ServiceNow, which surged over 20%. Shopify, Workday, and Asana each gained at least 14% [1]. Among software giants with cloud infrastructure offerings, Oracle rose 16% and Microsoft gained almost 8%, though Microsoft remains down nearly 7% for the year, the weakest performance among major tech companies [1].
Despite the strong rally, the iShares software ETF is still down 3.8% for the year, lagging behind the Nasdaq's 18% gain in 2026 [1].
CONCLUSION
May 2026 marked a robust rebound for software stocks, driven by strong earnings and optimism around AI adaptation, with Snowflake and Okta leading the charge. While the sector remains behind the broader Nasdaq index for the year, the recent rally suggests renewed investor confidence as AI disruption fears ease.